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Low-Carbon Policies to Push up Firms’ Operating Costs

The UK’s climate watchdog – the Committee on Climate Change (CCC) – has said that the government’s low-carbon policies will put a significant upward pressure on businesses’ costs in the years ahead.

The finding came in an assessment of the impact of green policies on business energy bills, released by the CCC on 16 March.

The CCC found that energy costs, at present, accounted for around 0.9% of operating costs across the commercial sector, 2.0% across manufacturing and 3.8% for more energy-intensive sectors.

The costs from low-carbon policies specifically were 0.2% of operating costs for the commercial sector, 0.4% for manufacturing and 0.7% for the more energy-intensive sectors.

The CCC’s central projection suggests that, to 2020, these figures could increase to 0.3%, 0.6% and 1.0% respectively.

By 2030, these proportions would then rise to 0.5%, 1.0% and 1.6%. While still relatively small, this would represent a marked increase on the current levels.

Industry competitiveness

In order to ensure that low-carbon policies did not undermine the competitiveness of the UK manufacturing sector, the report said the government would need to ensure that its package of compensation and policy exemptions for firms in the sector remained “predictable and reliable”.

Measures that would exempt energy intensives from some of the costs of the government’s green levies are currently being progressed through Parliament.

The report also emphasised that much of the pressure placed on bills by low-carbon policies could be offset by investments in energy efficiency technologies.

These would help businesses to reduce their demand for energy and therefore lower their overall costs.

These figures underline the increasing impact that low-carbon policies will have on business energy bills in the years ahead.